Amazon's (AMZN) cloud division, Amazon Web Services (AWS), announced its plans to set up an infrastructure region in Israel, starting in the first half of 2023.
With the new region, which is expected to be operative in the first half of 2023, the company aims to strengthen the cloud infrastructure in Israel and provide enhanced cloud services to developers, startups, enterprises, and non-profit organizations.
AWS Regions are comprised of Availability Zones, which place infrastructure in discrete geographic locations with sufficient distance to reduce the risk of a single event impacting the continuity of customers’ businesses.
Moreover, AWS was selected by the government of Israel as its primary cloud provider to speed up digital transformation in the country.
“The new AWS Israel (Tel Aviv) Region will empower more public and private institutions, innovative startups, and global companies to deliver built-for-the-cloud applications that help fuel economic development across the country, said Peter DeSantis, SVP, AWS Global Infrastructure.” (See Amazon stock analysis on TipRanks)
DeSantis further added, “The new region is a continuation of our investment to support enterprises of all kinds, help startups scale and grow, enable technical skills development, and create cloud literacy. Cloud technology is at the heart of the Israeli government’s digital transformation program, and their approach highlights the importance of setting a strong course for cloud adoption and leading by example to re-invent citizen services.”
Merrill Lynch analyst Justin Post reiterated a Buy rating with a price target of $4,360 on Amazon stock. Nowak’s price target implies 30.3% upside potential.
Post commented, “The approximate 40% growth this year follows an approximate 40% sq. ft. growth in 2020 (and this could be understated since there is a lot of activity that is not disclosed), a positive sign for future sales."
He further added, "Recent developments in Amazon’s logistics build out include: 1) new types of same day fulfillment centers that are co-located with delivery stations that carry over 100k stock keeping units (SKUs), with only 19 of these facilities in US now, but likely to roll out to top 50 US markets; 2) air hub coming Online, purchase of an additional 11 aircraft (now 75 aircraft total), and 153 flights per day globally, including recent launch of flights in Germany; and 3) launching new Sortation Centers in more rural areas, reducing areas where Amazon depends on US Postal Service and UPS.”
Consensus among analysts is a Strong Buy based on 31 unanimous Buys. The AMZN average analyst price target of $4,295.17 implies 28.3% upside potential from the current levels. Shares have gained 30.1% over the past year.
Amazon scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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Amazon (AMZN) has secured exclusive rights to stream most of the Ligue 1 football games on Amazon Prime Video in a deal with France’s Professional Football League. Ligue 1 is France’s top professional soccer league. The deal will run for the next three seasons.
Prime Video will begin showing the games in August for the 2021 - 2022 season. It will stream 302 matches during the season, representing 80% of Ligue 1 games. Amazon’s programming will include the league’s top 10 “first choices.”
“Ligue 1 is the most watched national football competition in the country and we are incredibly proud to showcase every club and the best posters in the league every week for the next three seasons,” commented Alex Green, MD of Prime Video Sport Europe.
The deal is expected to expand Amazon’s sports programming, which already includes England’s Premier League, the U.S. Open, and cricket tournaments in New Zealand and India.
The company plans to share more details, including price and production, on the Ligue 1 programming in the coming weeks, before the season kicks off. The Amazon Prime subscription, which comes with the Prime Video service, costs €49 per year or €5.99 per month in France. (See Amazon stock analysis on TipRanks)
Merrill Lynch analyst Justin Post recently reiterated a Buy rating with a price target of $4,360 on Amazon stock. The analyst’s price target implies 30% upside potential.
Consensus among analysts is a Strong Buy based on 31 Buys. The Amazon average analyst price target of $4,295.17 implies 28% upside potential to current levels.
According to TipRanks’ Hedge Fund Trading Activity tool, confidence in AMZN is currently Very Positive. The cumulative change in holdings across all 56 funds that were active in the last quarter was an increase of 660,500 shares.
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Since pulling back from all-time highs back in February, Roku (ROKU) stock hasn’t had much luck bouncing back. The streaming pioneer continues to charge ahead. Having gotten its start in the hardware end of the business, lately it’s been expanding its role in the content end as well.
In theory, this move should have investors excited. Yet, after already bidding up the stock at the end of 2020, much of what’s coming up has likely been factored into its share price. That’s clear from its current valuation. (See ROKU Stock Analysis on TipRanks)
Add in the fact that competition is heating up in the streaming arena, and it’s understandable why investors have taken such an “on the fence” view. For now, this mixed sentiment could continue.
The company may be making the right moves. Nevertheless, until investors start seeing tangible positive results from its further expansion, investors will remain hesitant to bid up shares much higher from today’s prices (around $347 per share).
ROKU Stock and Streaming Competition
Roku may have made a name for itself as a purveyor of streaming devices. On the other hand, in order to stay ahead of tech-based rivals like Amazon (AMZN), Apple (AAPL), and Google parent Alphabet (GOOGL), it knows it has to offer up more than just streaming devices, and an ad network for third-parties.
That’s why Roku has been making a big push into streaming content as of late. This includes its purchase of failed streaming app Quibi’s content library, as well as its deal to stream new releases from independent studio Saban Films.
At a time where Amazon is cutting big checks to secure content (its $9 billion deal to buy MGM), and content giants are planning to merge, like the pending WarnerMedia/Discovery (DISCA) deal, will Roku’s efforts be enough?
Only time will tell. As its valuation remains sky-high, and investors take a “wait and see” approach, it may be difficult for shares in the near-term to move much higher from today’s prices.
Valuation Could Hold, But There’s Little Room for Expansion
It’s still uncertain whether Roku’s push into content will pay off. Yet, that’s not to say analysts aren’t projecting high levels of growth in the coming year. Set to grow its revenues by 54.1% this year, estimates call for the top line to grow another 36.8% in 2022. Earnings are also set to explode over the next year. Estimated to earn 37 cents a share this year, its bottom line is expected to rise by 127.5% next year, to $1.02 per share.
This high level of growth is why the stock has managed to achieve and maintain such a high valuation. At today’s prices, the stock sells for 12.2x estimated 2022 sales, and a staggering 338.7x 2022 earnings.
Given that its projected growth remains high, and there’s a possibility its streaming expansion could result in better-than-expected results, ROKU stock may not be at risk of pulling back further on multiple contraction.
On the other hand, could it see multiple expansion in the near future? Probably not. Already selling at a premium to not just its more diversified tech and entertainment industry rivals, but streaming pure plays like Netflix (NFLX) as well, it’s questionable whether this is in the cards.
What Analysts are Saying About ROKU Stock
According to TipRanks, ROKU stock has a consensus rating of Strong Buy. Out of 18 analyst ratings, 15 rate it a Buy, 2 analysts rate it a Hold, and 1 analyst rates it a Sell.
As for price targets, the average analyst Roku price target today is $449.94 per share, implying around 29.7% in upside from today’s prices. Analyst price targets range from a low of $300 per share, to a high of $560 per share.
Bottom Line: Expect Investors to Continue Taking a ‘Wait and See’ Approach
Even after its nearly 30% pullback from its February highs, Roku’s future growth is still largely factored into its stock price. In order to wow investors once again and kick off a rebound back to prior highs, it needs to not only meet, but beat, expectations.
Better-than-expected results could be ahead if its recent aggressive push into content pays off. Until that happens, expect investors to continue taking a “wait and see” approach with ROKU stock.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Starbucks (SBUX) is seeking the right to put its name on a sports stadium or training facilities, according to a CNBC report. The coffee chain filed for the stadium naming rights with the U.S. Patent and Trademark Office on June 2.
The company said in the filing that it intends to use its name to promote business, sports, and entertainment events. However, the company declined to discuss its plans beyond the filing, according to the report.
If Starbucks secures the approval for the stadium naming rights, it would join corporations such as Amazon (AMZN), FedEx (FDX), and Barclays (BCS) that have used their brands on stadiums and arenas. (See Starbucks stock analysis on TipRanks)
Companies put their names on sports venues to drive brand awareness and secure fan loyalty. But stadium sponsorship does not come cheap. For example, e-commerce and cloud computing provider Amazon spent anywhere between $300 million and $400 million last year for the rights to name a Seattle arena Climate Pledge Arena, according to the CNBC report.
BMO Capital analyst Andrew Strelzik reiterated a Buy rating on Starbucks stock and raised the price target to $125 from $120. The analyst’s new price target implies 11.05% upside potential.
Strelzik observed that Starbucks' sales should continue to improve even though margin targets still look conservative. The analyst noted a recovery in Starbucks’ U.S. business where two-year comps rose 6% above pre-pandemic levels. However, the international business is still sluggish, with sales in places like China falling short of expectations.
Consensus among analysts is a Moderate Buy based on 14 Buys and 10 Holds. The Starbucks average analyst price target of $125.09 implies 11.13% upside potential to current levels.
SBUX scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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For investors in hyper-growth stocks like Shopify (SHOP), recent weeks have provided some significant volatility. Shopify stock has ebbed and flowed between a relatively consistent range of $1,000-$1,300 per share over the past three months. Currently, Shopify trades at roughly $1,200.
Now, it’s worth noting that this stock is still down approximately 20% from its all-time high of nearly $1,500 per share seen earlier this year. Indeed, sorting out whether this recent dip in SHOP stock is worth a buy is the main concern for most investors. (See Shopify stock analysis on TipRanks)
For long-term growth-focused investors like Cathie Wood, Shopify has been a top buy of late. Ms. Wood has compared Shopify to e-commerce juggernaut Amazon (AMZN), a rather flattering comparison.
Let’s take a look at whether Shopify’s got similar growth potential over the long-term.
Growth Is the Name of the Game for Investors in SHOP Stock
Indeed, the most common comparison for Shopify right now happens to be Amazon. When Cathie Wood points out the similarities, investors take notice.
From a valuation perspective, Shopify’s current multiples may seem obscene. Indeed, even compared to Amazon, a company with a historically-high multiple, Shopify trades at nosebleed levels.
Accordingly, let’s take a look at how these companies stack up. Here’s a look at a few key metrics:
Shopify's trailing price-to-sales ratio is 45, and Amazon's is 4. Shopify's trailing price-to-earnings ratio is 96.2. Amazon's is 62.
Shopify's EV/EBITDA is 83.6, while Amazon's is 27.6.
When it comes to trailing gross margins, Shopify's is 10.5%, versus Amazon's at 7.1%. Net margins of the two companies have a far wider gap, with Shopify at 46.7% and Amazon at 6.4%.
Revenue growth rate of Shopify is more than double that of Amazon. Shopify's is 99.6%, and Amazon's is 41.5%.
Now, on a price-to-sales basis, we can see that Shopify is currently valued more than 10 times higher than Amazon. On a price-to-earnings and EV/EBITDA basis, this valuation gap is also significantly large.
Despite those promising numbers, looking at Shopify’s margins and growth rate is really where investors get excited. Shopify isn’t just growing – it’s growing very fast. And it’s doing so profitably. Very profitably.
Shopify’s stellar top- and bottom-line margins provide cash flow generation investors are betting will be used to fuel additional growth. As the company continues to monetize merchant revenues, while taking a slice of transactions made on its platform, Shopify is double-ending each transaction. These cash flows are similar to those of other large credit card companies, and Shopify’s valuation certainly reflects a similarly large moat.
Accordingly, gross merchandize volume (GMV) is a key metric investors will want to watch with Shopify. The extent to which transaction volumes increase on its existing platform will give an indication as to which direction profitability is headed. Even if revenue growth slows over time, as many analysts think it will, if Shopify’s GMV can grow, and if the company can capture a greater percentage on its GMV in percentage terms, Shopify could turn into a cash flow machine.
That said, there are risks to Shopify stock. Let’s take a look at some of the key things investors should be paying close attention to.
Rate of Growth Deceleration a Key Metric
Prior to the pandemic, Shopify’s growth rate had started to slow. This makes sense: the larger a company gets, the more difficult it becomes to maintain sky-high growth rates. Eventually, a company reflects the market, assuming it’s able to capture its maximum market share and expand its margins as widely as possible. Accordingly, at some point, Shopify will become a slow-growth mature company in a developed sector.
How soon we get there is the question. Indeed, a massive e-commerce boost courtesy of the pandemic has resulted in investors pressing pause on this discussion. Shopify’s recent quarterly year-over-year growth rates are insane. That said, in all probability, we’ll be back to the growth deceleration conversation shortly.
Investors will want to see revenue growth maintain and decelerate slowly over time, as it had in the past. Any rapid deceleration is a risk investors need to be aware of.
What Analysts Are Saying About SHOP Stock
According to TipRanks’ analyst rating consensus, SHOP stock comes in as a Moderate Buy. Out of 21 analyst ratings, there are 12 Buy recommendations and 9 Hold recommendations.
As for price targets, the average analyst Shopify price target is $1,491.10, with a 19.6 potential upside. Analyst price targets range from a low of $1,340.00 per share to a high of $1,900.00 per share.
Bottom Line
The extent to which Shopify can continue to bolster its moat by entrenching its customer base, creating higher switching costs, and building out its ecosystem so that its merchants won’t want to leave, remains to be seen. However, thus far, Shopify has done an incredible job in this regard.
Barring a rapid deceleration in the company’s top-line growth rate, SHOP stock looks like an excellent growth play today. It’s entirely feasible that Shopify could make new all-time highs this year, if growth stocks get a boost. For long-term investors, this near-term volatility should simply represent noise. This certainly holds true for those true believers in SHOP stock, such as Cathie Wood.
Disclosure: Chris MacDonald held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
Shopify (SHOP) is surging again, even as most other unprofitable high-growth stocks continue treading water. Shares of the Canadian e-commerce darling rose more than 12% in the past month. The stock ended Friday 3.4% higher than the beginning of the week, on the back of continued optimism surrounding its deal with Alphabet’s (GOOGL) Google.
In what could be a major blow to Amazon (AMZN), Google plans to take its partnership with Shopify to the next level, by allowing Shopify's ~1.7 million merchants to have their stores discoverable through Google's search engine. (See SHOP stock analysis on TipRanks)
Google and Amazon Duke it Out
Undoubtedly, Google's "Shopping" tab has been an underrated tool that could have been better utilized in its battle against Amazon. The disruptive force that is Amazon has beckoned many digital shoppers to go straight to its app or website, pushing Google searches right out of the equation. Call it a side effect of Amazon's dominance, if you will.
These days, many folks looking to buy goods online have made going straight to Amazon (and not Google) a habit, especially during COVID-19 lockdowns. Through the eyes of many Amazon Prime users, Amazon is the ultimate one-stop-shop on the internet.
The latest Shopify-Google partnership could allow Google to pry back a bit of the shopping-focused searches lost at the hands of Amazon. If the partnership goes well, it could challenge Amazon's status as the ultimate one-stop-shop.
Google and Shopify Join Forces
There's no question that Amazon's continued strength in e-commerce has had a drastic negative impact on small-sized retailers with which it is in direct competition. Less known is the impact Amazon has had on large-scale firms, such as Google. They are not engaged in the same battlefield as small retailers are, but nonetheless feel increasing pressure from Amazon's growing dominance.
With the exception of cloud services, Amazon and Google aren't exactly what most people would dub as direct competitors. Amazon is an e-commerce kingpin, and Google is primarily in the business of search and ads. However, now that Google is teaming up with Shopify, it becomes more apparent that the two tech juggernauts are, in fact, starting to duke it out for common ground.
Shopify: Even More to Gain
Shopify, whose shares rocketed on the Google news, likely has a lot more to gain out of the mutually beneficial partnership.
The Canadian company's incredible e-commerce platform has been enjoying profound momentum in recent years. Merchants have flocked to its ecommerce platform as a host for their online stores and payment processor. Consumers have followed suit, and in its corner of the e-commerce space, Shopify almost seems untouchable.
Shopify has given Amazon a good run for its money over the years, and you could say that it is one of few firms that has successfully fended off Amazon. Small-and-medium-sized business (SMB) storefront platform Amazon Webstore was forced to close up shop nearly six years ago. All the while, Shopify has continued improving upon its offering. Amazon has faced limited success in trying to cut in on Shopify's turf, but it may not be ready to surrender just yet.
With Amazon acquiring Shopify competitor Selz earlier this year, it's clear that Amazon is not going down without a fight. Should the Google-Shopify partnership pay off, perhaps the disruptor (Amazon) could stand to be disrupted.
Wall Street Weighs In
According to TipRanks’ analyst consensus rating, SHOP stock comes in as a Moderate Buy with 13 Buy and 9 Hold ratings assigned in the last three months.
As for price targets, the average analyst SHOP price target is $1491.10 per share, implying around 19.6% upside potential from current levels.
Conclusion
Both SHOP and GOOGL stock could show serious gains from this partnership. Shopify has already shown its mettle in its ability to stand firm in the face of Amazon's dominance. With its newly fortified position as a Google partner, Shopify has even greater potential to garner more eyeballs, translating into more sales and a more robust business overall.
Disclosure: Joey Frenette owned shares of Amazon.com Inc. at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.